RBA MINUTES COULD IMPACT EURO/YEN CROSS RATE; SELL @130.00
Fundamental Catalyst – Equities have been rallying over the past several days but are finally starting to once again show signs of rolling back over. While the correlations between equity prices/risk appetite and the Yen have not been as compelling of late, they still need to be watched closely with a rapid turnaround in sentiment to likely once again fuel some profit taking on the Yen crosses. Additionally, contrary to what the markets had interpreted at the previous RBA decision in which the central bank left rates on hold at 3.25%, the revelation in the RBA minutes that the central bank was indeed prepared to cut rates again has quickly mitigated any positive reaction to the unchanged verdict. This has broader global macro implications, as it confirms that the global economy is still showing signs of deterioration, which ultimately could weigh on the cross.
Techs – Eur/Jpy – The rally out from the previous higher low at 121.75 from March 3 continues into Tuesday with the cross now looking to put in the 7th up-day in the past 8 days. However, we are now approaching critical multi-day range highs in the 130.00 area, and would expect to see some initial resistance at a minimum by 130.00 before even considering a more substantial upside breakout beyond. Daily studies are also starting to look stretched at current levels and we anticipate a move to 130.00 today will officially put the RSI above 70, leaving the cross exposed to a healthy corrective pullback. The overriding trend still remains grossly bearish and moves to 130.00 should also be met with some good sell interest from longer-term accounts looking to build on existing shorts. Strategy: SELL @130.00 FOR A 125.50 OBJECTIVE, STOP @131.60. Stops to be trailed to cost on a break back below 129.20. If trade triggers and 129.20 not broken, position to be closed out at NY close (5pm EST) on Tuesday. Recommendation to be removed if not triggered by NY close on Tuesday.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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